<FONT COLOR=BLUE>MARKET SNAPSHOT--1:02 PM--Major averages soften
WorldCom warning hurts telecoms
By Julie Rannazzisi, CBS.MarketWatch.com
Last Update: 1:02 PM ET Nov 1, 2000
NEW YORK (CBS.MW) - A profit warning from WorldCom put a damper on telecom stocks while a drop in Altera hobbled chip issues Wednesday. But the damage on the Nasdaq was capped by purchases in the Internet sector and the tech index erased the lion's share of its earlier losses.
The Dow, meanwhile, was held down by weakness in the financial sector as well as a 4.6 percent decline in shares of AT&T.
In the overall market, buyers snapped up oil, oil service and utility shares. December crude oil futures added 43 cents to $33.13 in the wake of the American Petroleum Institute's announcement that crude inventories fell by an unexpected 749,000 barrels.
"The Nasdaq has now tested the low area around 3,100 four times during the past month, which strengthens that level as a bottom. A break through resistance at the 3,500 level on the Nasdaq will clear the way for a move back to the 4,000 to 4,200 area," said Robert Dickey, chief technical strategist at Dain Rauscher Wessels.
"The earnings surprises during this period have been the reason for the selling pressure, but with each announcement, the pressure has been less pronounced with fewer stocks reacting to the news," Dickey noted.
He believes that as the earnings season winds down and confidence builds, technology will manage to put on a good showing at year-end.
The Dow Jones Industrials Average ($DJ) fell 65 points, or 0.6 percent, to 10,905.
The Nasdaq Composite ($COMPQ) gave up 39 points, or 1.2 percent, to 3,329 while the Nasdaq 100 Index erased 61 points, or 1.8 percent, to 3,221.
The Standard & Poor's 500 Index ($SPX) slumped 0.8 percent while the Russell 2000 Index ($RUT) of small-capitalization stocks shaved 0.6 percent.
Volume stood at 678 million on the NYSE and at 1.21 billion on the Nasdaq Stock Market. Market breadth remained sloppy, with decliners beating advancers by 15 to 12 on the NYSE and by 20 to 16 on the Nasdaq.
Sector movers
Telecom stocks were under the gun in a big way, with Merrill Lynch's Telecom Holdrs (TTH), a basket of 20 stocks, off 5.3 percent as WorldCom fell 16 percent to $20. The company (WCOM) said it expects fourth-quarter earnings of 34 to 37 cents a share versus the First Call consensus estimate of 49 cents a share, blaming the miss on intense pricing pressures and unfavorable exchange rates, among others. Further, WorldCom said it's splitting its businesses into two publicly traded tracking stocks.
In the fiber-optic group, Canada's Nortel Networks lost $2 to $43.50. The company (NT) said it'll match Wall Street's earnings-per-share expectations in the fourth quarter but will miss first-quarter estimates by a penny. Nortel, which fell 38 percent last week after missing Wall Street's revenue estimates, said it sees optical Internet revenue growth of over 125 percent in 2000 and growth in revenue and earnings-per-share of 30 to 35 percent in 2001. Among other stocks in the segment, Corning lost 3.8 percent to $73.69, Ciena added 2.5 percent to $107.81 and JDS Uniphase fell 1 percent to $80.63.
In the chip arena, Altera shaved $6.81 to $34.13. Late Tuesday, the company (ALTR) said its sees fourth-quarter sequential revenue growth at the low end of its previous guidance. WR Hambrecht & Co. lowered its rating on Altera to a "neutral" from a "strong buy" on a potential inventory correction it sees taking place in the March 2001 quarter. And Merrill Lynch lowered its 2000 earnings-per-share estimates on Altera, indicating that the company is losing market share to Xilinx. But Bear Stearns defended the stock, viewing weakness as a buying opportunity.
Xilinx (XLNX) also fell, losing 4.8 percent to $69.13, with WR Hambrecht slashing its rating on the company to "neutral" from "buy." The losses in Altera and Xilinx took the Philly Semiconductor Index ($SOX) down 3.7 percent.
The climb in Internet stocks was a bright spot for the tech sector with bellwethers such as Yahoo, up 8.4 percent, CMGI, up 16.3 percent, and EBay, up 5.9 percent, checking in with smashing gains. Merrill's Internet Holdrs (HHH) put on 4.2 percent.
Brokerage shares retreated as Goldman Sachs cut its December quarter profit estimates for Lehman Brothers (LEH), Morgan Stanley Dean Witter (MWD) and Merrill Lynch (MER). Moreover, Salomon Smith Barney lowered fourth-quarter estimates for Goldman Sachs (GS), Lehman and Morgan Stanley. The Nasdaq's poor performance in October, which stalled the IPO pipeline, has hampered the profits of brokerages. Lehman shaved 5 percent to $61.25, Merrill fell 4 percent to $67.19 and Goldman lost 4 percent to $95.75. The Amex Securities Broker/Dealer Index ($XBD) slipped 2.1 percent.
Treasury focus
Treasury issues edged higher, taking their cues from sogginess in the stock market.
The 10-year Treasury note eked out a 1/32 gain to yield ($TNX) 5.75 percent while the 30-year government bond added 3/32 to yield ($TYX) 5.785 percent.
Wednesday saw the release of the National Association of Purchasing Management Index, which fell to 48.3 percent in October versus the previous month's 49.9 percent reading. The number was less than the 49.6 percent expected by economists surveyed by CBS MarketWatch.com. In other news, September construction spending rose 2.4 percent. Still ahead is the Federal Reserve's Beige Book report on business conditions. View Economic Preview, economic calendar and forecasts and historical economic data.
Focusing on the foreign exchange market, dollar/yen slipped 0.4 percent to 108.33 while euro/dollar climbed 1.2 percent to 0.8585, hovering at its highest level since mid-October. The European Central Bank will meet to decide the fate of short-term interest rates on Thursday. The ECB last raised rates on October 5 for the seventh time this year in an unexpected move that surprised markets. |
